Automobile Companies paving way to big business in East Africa

Posted on :Saturday , 7th November 2015

Muscling its way into the market is China’s Beiqi Foton Motor, which last year delivered over 10,000 vehicles to Africa and in March established a sales division in Kenya. It is busy finishing construction of a US$50-million assembly plant in Nairobi that it claims will have capacity for delivering 10,000 vehicles a year to the region.

Foton designs and manufactures trucks, buses, tippers, prime movers, and pick-ups. It has started customising its vehicles for the African market, installing bigger engines and oil tanks knowing that the majority of its buyers need to travel long distances.

By assembling vehicles in Foton will avoid a 25 percent import duty. India’s Tata Motors is said to also be investigating a local assembly plant with an eye to avoiding this tax.

Demand for heavy commercial vehicles and pickups is on the increase in EA, fuelled by steady growth in agriculture, transportation, construction and telecoms as well as the fact that entrepreneurs and small businesses are increasingly eschewing used vehicles in favour of buying new. Caroline Wamai, a DT Dobie Kenya manager, says “Cargo transport business has been booming partly due to a railway system that is inefficient and clogged.”

Toyota, Simba Colt Motors and General Motors (GM) East Africa are the three giants fighting for dominance in the pickup truck market. The Kenya Motor Industry Association (KMI) reports that 2,873 one-ton pickups were sold in December 2013 versus 2,729 in December 2012, which makes for a 5.3 percent increase in sales.

In terms of most popular models, Joseph Njenga, MD of Nairobi-based Vas Auto Garages, says, “We are seeing Toyota models as the most popular in the market, followed by the Nissan pickups. Other models such as the Ford Ranger have been struggling to gain a foothold in this fiercely competitive segment.” Toyota has long been a top player in East Africa (EA), and last year announced the building of a Kenya-based assembly plant to increase its role in the regional market.

A new entrant into the Kenyan market, and one that is setting tongues wagging, is Scania East Africa Ltd, a subsidiary of Scania CV Sweden. Scania sells primarily cargo trucks and standard and luxury buses.

Also fighting for a portion of the bus market is GM, which last year injected over US$2 million into a plant renovation, a project that included the construction of a new bus technology centre.

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